A bank offers an account with an APR of 6% and an EAR of 6.09%. How does the bank compound interest for this account?

Name: A bank offers an account with an APR of 6% and an EAR of 6.09%. How does the bank compound interest for this account?
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Question

Quizplus · Accepted Answer

The EAR is 6.09%, which is greater than the APR of 6%. This means that the bank is compounding interest more than once per year. The only option that is more frequent than annual compounding is semiannual compounding.

A Bank Offers an Account with an APR of 6